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In Rowe v. Nationwide Insurance Company, the insured was injured in an auto accident in which she bore no fault. She settled with the other driver’s carrier for $15,000, and brought UIM and property damage claims against her own insurer. On the property damage claim, the parties were approximately $3,500 apart in settling the value of the loss, which the insurer rated a total loss; and additional damages of approximately $1,600 were done to the car while in the carrier’s care.

The parties came to no agreement, the insured filed suit on the property damage claim, and a number between the parties’ prior positions was awarded as judgment.

The insured also claimed personal injuries on the UIM claim, which was assigned to an adjuster, who requested a copy of the police report, inquired about the status of the medical treatments, and spoke with the other driver’s insurer to discuss the claim. The adjuster followed up with the insured’s counsel for almost a year and a half, but was unable to fully evaluate the claim because the insured did not provide complete medical records. Some small benefits were paid based on chiropractic treatments, and eventually the insured’s counsel provided additional medical records.

The insured’s counsel later told the carrier that she was unable to estimate a value for the UIM claim until she received additional medication information. The chiropractor’s report came after that. After the liability insurer paid $15,000 on the bodily injury (and the UIM insurer waived subrogation), the insureds submitted a package of information, and demanded $313,500. The carrier did its own internal medical management review, and informed the insureds that the injuries, as presented, did not surpass the $15,000 bodily injury credit from the liability carrier, but would further evaluate the claim.

The carrier took a statement under oath, engaged a specialist to review the medical records, and scheduled an IME; but the latter was cancelled, purportedly because of the distance the insured had to travel. The IME was later conducted at closer location. The carrier offered $5,000 on the UIM claim, the counter-demand was $275,000, the insured brought suit, and the UIM claimed settled at $50,000. However, statutory and contractual bad faith claims remained open.

The court issued the opinion in a cross-motion for summary judgment posture.

The basis for the bad faith claims was the putative violation of the Unfair Insurance Practices Act (“UIPA”) for refusal to pay claims, not attempting in good faith to effectuate a prompt, fair and equitable settlement of plaintiffs’ claims in this clear liability case, compelling plaintiffs to institute litigation to recover the amounts due under their insurance policy, attempting to settle plaintiffs’ claims for less than the amount that a reasonable man would believe he was entitled to; and for regulatory violations in not completing the investigation within 30 days or providing the insured with a reasonable written explanation for the delay in not completing the investigation in 30 days, by stating when a decision may be expected every 45 days thereafter. The insured claimed that the insurer could not produce notices sent every 45 days, because it did not send the notices.

On the contractual bad faith claim, the court observed that the insured must show that the insurer’s conduct was unreasonable or negligent by clear and convincing evidence. Although there is generally no breach of contract claim where the insurer pays the policy proceeds, an insured may be able to bring a bad faith claim for damages stemming from an insurer’s bad faith in handling a claim, and the damages sought may be different from the damages compensated by payment per the insurance policy; and therefore such damages may not be remedied by simply paying the policy proceeds.

In such a situation, if there is a breach of the contractual duty of good faith and fair dealing, the insurer may be liable for the known and/or foreseeable compensatory damages of its insured that reasonably flow from the insurer’s bad faith conduct.

In this case, however, the insureds did not adduce clear and convincing evidence that the insurer’s conduct was unreasonable or negligent. The insureds, who moved for summary judgment based on the UIPA violations, failed to demonstrate a violation of the covenant of good faith and fair dealing by breaching a specific duty imposed by the contract. Rather, the evidence in the record showed that the settlement offers were based on the insurer’s honest, considered judgment following a careful and thorough investigation.

That the insured disagreed with the insurer’s claim evaluation is simply not a basis for a contractual bad faith claim where the insureds have not shown that the carrier breached some contractual duty.

The insureds attempted to avoid this result by arguing that this was not a mere difference of opinion over valuing their claims, but that the insurer’s conduct covered more than the unfair valuation of their claims. The court found this argument contradicted by the insureds’ own allegations that the insurer failed and refused to pay UIM coverage in breach of the insurance contract, and only offered a fraction of the value of the insureds’ claim. Instead the court found that the insurer demonstrated a reasonable basis for its conduct, and summary judgment on the contractual bad faith claim went to the insurer.

On the statutory bad faith claim, bad faith can include such conduct as an unreasonable delay in handling claims; a frivolous or unfounded refusal to pay; a failure to communicate with the insured; acting in a dilatory manner; settlement offers which bear no reasonable relationship to the insured’s reasonable medical expenses; and conducting an inadequate investigation. There must be clear and convincing evidence, not “mere insinuation”.

At the summary judgment stage, the insured’s burden in opposing a summary judgment motion brought by the insurer is commensurately high because the court must view the evidence presented in light of the substantive evidentiary burden at trial. However, if a reasonable jury could find the insurer did not have a reasonable basis for denying benefits under the policy and knew of or recklessly disregarded this, summary judgment is not appropriate.

As to the property damage claim, the insureds alleged that the carrier offered “far less” than value, threatened to abandon the car and charge costs to the insured unless they settled, caused further damage while in the insured’s possession, and the insured had to sue to get relief.

On the UIM claim, the insured was subject to improper efforts to require an IME at a distance instead of locally; the insurer delayed settlement for its economic benefit and failed to offer a prompt, fair, and equitable settlement of the personal injury claims, forcing the insureds into litigation; and attempting to settle for an unreasonable sum. Further the insurer failed to complete its investigation in the 30 day period or provide written explanations in 45 day increments. The court analyzed these allegations in great detail, one by one.

First, the car’s valuation was based upon a market report and was not unreasonable, and the insured offered no additional information to show why the insurer should deviate from the value. Further, the insured himself admitted at deposition that he valued the car closer to the carrier’s number than his own.

Next, after a close look at the facts, the claim that the insurer threatened to “abandon” the car as an act of coercion was held not to be the case.

As to the additional damage, the insurer had already valued the car as a total loss, and there was no bad faith associated with the additional damage. Finally, the court rejected the idea that the insureds “had to sue” to be paid, since the insurer had made a reasonable settlement offer. Summary judgment was granted to the insurer on the statutory bad faith property damage claim.

Addressing the UIM statutory bad faith claim, there was no bad faith in initially scheduling the IME at some distance from the insured’s home, and then rescheduling it closer. As to the alleged improper delay in resolving the claims, a long period of time between demand and settlement does not, on its own, necessarily constitute bad faith where delay is attributable to the need to investigate further or even to simple negligence. The court found the delays reasonably explained.

As to the prompt settlement, and 30 day claims, the evidence in the record showed that the length of time between the filing of the claim and final settlement of the claim was the result of the insurer’s investigation and the insureds’ own conduct. As to the 30 day/45 day regulations, the court found that the insureds failed to provide evidence demonstrating that insurer failed to comply with 31 Pa. Code §§ 146.6 and 146.7.

Moreover, even if the carrier was negligent in failing to inform the insureds of the investigation’s progress in the precise manner mandated by the regulations, such negligence did not constitute bad faith in that case. The record was replete with evidence of regular written and oral communication from the insurer to the insureds and their lawyer concerning the status and progress of the investigation.

As to the settlement sum, the evidence in the record showed that the insurer conducted a reasonable investigation and based its offer on the medical records and expert reports, which the court went through in detail. Moreover, the insured’s own testimony demonstrated that the insurer did not unreasonably undervalue the claim. The insureds failed to show with clear and convincing evidence that the offer lacked a reasonable basis.

Finally, the court apparently concluded that based on the foregoing factual analysis in its opinion, the insureds did not provide evidence supporting allegations of the violation of statutes and regulatory provisions as the basis for a bad faith claim.

Date of Decision: March 20, 2014

Rowe v. Nationwide Ins. Co., CIVIL ACTION NO. 3:12-81, 2014 U.S. Dist. LEXIS 36302 (W.D. Pa. March 20, 2014) (Gibson, J.)